Has Globalization Really Increased Business Cycle Synchronization?
Abstract： This paper assesses the strength of business cycle synchronization between 1950 and 2014 in asample of 21 countries using a new quarterly dataset based on IMF archival data. Contrary to thecommon wisdom, we find that the globalization period is not associated with more outputsynchronization at the global level. The world business cycle was as strong during Bretton Woods(1950-1971) than during the Globalization period (1984-2006). Although globalization did notaffect the average level of co-movement, trade and financial integration strongly affect the waycountries co-move with the rest of the world. We find that financial integration de-synchronizesnational outputs from the world cycle, although the magnitude of this effect depends crucially onthe type of shocks hitting the world economy. This de-synchronizing effect has offset thesynchronizing impact of other forces, such as increased trade integration.
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